Exhibit 10.2


                            ADMINISTRATION AGREEMENT

         AGREEMENT (this "Agreement") made as of August 4, 2005 by and between
BlackRock Kelso Capital Corporation, a Delaware corporation (hereinafter
referred to as the "Corporation"), and BlackRock Financial Management, Inc., a
Delaware corporation (hereinafter referred to as the "Administrator").


                              W I T N E S S E T H:

         WHEREAS, the Corporation is a newly organized closed-end management
investment company that has elected to be treated as a business development
company under the Investment Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act");

         WHEREAS, the Corporation desires to retain the Administrator to
provide administrative services to the Corporation in the manner and on the
terms hereinafter set forth; and

         WHEREAS, the Administrator is willing to provide administrative
services to the Corporation on the terms and conditions hereafter set forth.

         NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained and for other good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Corporation and the
Administrator hereby agree as follows:

         1. Duties of the Administrator.

                  (a) Employment of Administrator. The Corporation hereby
         employs the Administrator to act as administrator of the Corporation,
         and to furnish, or arrange for others to furnish, the administrative
         services, personnel and facilities described below, subject to review
         by and the overall control of the Board of Directors of the
         Corporation, for the period and on the terms and conditions set forth
         in this Agreement. The Administrator hereby accepts such employment
         and agrees during such period to render, or arrange for the rendering
         of, such services and to assume the obligations herein set forth
         subject to the reimbursement of costs and expenses as provided for
         below. The Administrator and any such other persons providing services
         arranged for by the Administrator shall for all purposes herein be
         deemed to be independent contractors and shall, unless otherwise
         expressly provided or authorized herein, have no authority to act for
         or represent the Corporation in any way or otherwise be deemed agents
         of the Corporation.

                  (b) Services. The Administrator shall perform (or oversee, or
         arrange for, the performance of) the administrative services necessary
         for the operation of the Corporation. Without limiting the generality
         of the foregoing, the Administrator shall provide the Corporation with
         office facilities, equipment, clerical, bookkeeping and record keeping
         services at such office facilities and such other services as the
         Administrator, subject to review by the Board of Directors of the
         Corporation, shall from time to time determine to be necessary or
         useful to perform its obligations under this Agreement. The
         Administrator shall also, on behalf of the Corporation, arrange for
         the services of, and oversee, custodians, depositories, transfer
         agents, dividend disbursing agents, other stockholder servicing
         agents, accountants, attorneys, underwriters, brokers and dealers,
         corporate fiduciaries, insurers, banks and such other persons in any
         such other capacity deemed to be necessary or desirable. The
         Administrator shall make reports to the Corporation's Board of
         Directors of its performance of obligations hereunder and furnish
         advice and recommendations with respect to such other aspects of the
         business and affairs of the Corporation as it shall determine to be
         desirable; provided that nothing herein shall be construed to require
         the Administrator to, and the Administrator shall not, provide any
         advice or recommendation relating to the securities and other assets
         that the Corporation should purchase, retain or sell or any other
         investment advisory services to the Corporation. The Administrator
         shall be responsible for the financial and other records that the
         Corporation is required to maintain and shall prepare all reports and
         other materials required to be filed with the Securities and Exchange
         Commission (the "SEC") or any other regulatory authority, including
         reports to stockholders. At the Corporation's request, the
         Administrator will provide on the Corporation's behalf significant
         managerial assistance to those portfolio companies to which the
         Corporation is required to provide such assistance. In addition, the
         Administrator will assist the Corporation in determining and
         publishing the Corporation's net asset value, overseeing the
         preparation and filing of the Corporation's tax returns, and the
         printing and dissemination of reports to stockholders of the
         Corporation, and generally overseeing the payment of the Corporation's
         expenses and the performance of administrative and professional
         services rendered to the Corporation by others.

         2. Records. The Administrator agrees to maintain and keep all books,
accounts and other records of the Corporation that relate to activities
performed by the Administrator hereunder and, if required by the Investment
Company Act, will maintain and keep such books, accounts and records in
accordance with that act. In compliance with the requirements of Rule 31a-3
under the Investment Company Act, the Administrator agrees that all records
that it maintains for the Corporation shall at all times remain the property of
the Corporation, shall be readily accessible during normal business hours, and
shall be promptly surrendered upon the termination of this Agreement or
otherwise on written request. The Administrator further agrees that all records
which it maintains for the Corporation pursuant to Rule 31a-1 under the
Investment Company Act will be preserved for the periods prescribed by Rule
31a-2 under the Investment Company Act unless any such records are earlier
surrendered as provided above. Records shall be surrendered in usable
machine-readable form. The Administrator shall have the right to retain copies
of such records subject to observance of its confidentiality obligations under
this Agreement.

         3. Confidentiality. The parties hereto agree that each shall treat
confidentially all information provided by each party to the other regarding
its business and operations. All confidential information provided by a party
hereto, including nonpublic personal information pursuant to Regulation S-P of
the SEC, shall be used by any other party hereto solely for the purpose of
rendering services pursuant to this Agreement and, except as may be required in
carrying out this Agreement, shall not be disclosed to any third party, without
the prior consent of such providing party. The foregoing shall not be
applicable to any information that is publicly available when provided or
thereafter becomes publicly available other than through a breach of this
Agreement, or that is required to be disclosed by any regulatory authority, any
authority or legal counsel of the parties hereto, by judicial or administrative
process or otherwise by applicable law or regulation.

         4. Compensation; Allocation of Costs and Expenses.

                  (a) In full consideration of the provision of the services of
         the Administrator, the Corporation shall reimburse the Administrator
         for the costs and expenses incurred by the Administrator in performing
         its obligations and providing personnel and facilities hereunder.

                  (b) The Corporation will bear all costs and expenses that are
         incurred in its operation and transactions and not specifically
         assumed by the Corporation's investment adviser (the "Adviser"),
         pursuant to that certain Investment Management Agreement, dated as of
         July 25, 2005 by and between the Corporation and the Adviser. Costs
         and expenses to be borne by the Corporation include, but are not
         limited to, those relating to: organization and offering; calculating
         the Corporation's net asset value (including the cost and expenses of
         any independent valuation firm); expenses incurred by the Adviser
         payable to third parties, including agents, consultants or other
         advisors, in monitoring financial and legal affairs for the
         Corporation and in monitoring the Corporation's investments and
         performing due diligence on its prospective portfolio companies;
         interest payable on debt, if any, incurred to finance the
         Corporation's investments; offerings of the Corporation's common stock
         and other securities; investment advisory and management fees;
         administration fees, if any, payable under this Agreement; fees
         payable to third parties, including agents, consultants or other
         advisors, relating to, or associated with, evaluating and making
         investments; transfer agent and custodial fees; federal and state
         registration fees; all costs of registration and listing the
         Corporation's shares on any securities exchange; federal, state and
         local taxes; independent directors' fees and expenses; costs of
         preparing and filing reports or other documents required by the SEC;
         costs of any reports, proxy statements or other notices to
         stockholders, including printing costs; the Corporation's allocable
         portion of the fidelity bond, directors and officers/errors and
         omissions liability insurance, and any other insurance premiums;
         direct costs and expenses of administration, including printing,
         mailing, long distance telephone, copying, secretarial and other
         staff, independent auditors and outside legal costs; and all other
         expenses incurred by the Corporation or the Administrator in
         connection with administering the Corporation's business, including
         payments under this Agreement based upon the Corporation's allocable
         portion of the Administrator's overhead in performing its obligations
         under this Agreement, including rent and the allocable portion of the
         cost of the Corporation's officers and their respective staffs.

         5. Limitation of Liability of the Administrator; Indemnification. The
Administrator, its affiliates and their respective officers, managers,
partners, agents, employees, controlling persons, members, and any other person
or entity affiliated with any of them (collectively, the "Indemnified
Parties"), shall not be liable to the Corporation for any action taken or
omitted to be taken by the Administrator in connection with the performance of
any of its duties or obligations under this Agreement or otherwise as
administrator for the Corporation, and the Corporation shall indemnify, defend
and protect the Administrator (and its officers, managers, partners, agents,
employees, controlling persons, members, and any other person or entity
affiliated with the Administrator, including without limitation the Indemnified
Parties (each of whom shall be deemed a third party beneficiary hereof) and
hold them harmless from and against all damages, liabilities, costs and
expenses (including reasonable attorneys' fees and amounts reasonably paid in
settlement) incurred by the Indemnified Parties in or by reason of any pending,
threatened or completed action, suit, investigation or other proceeding
(including an action or suit by or in the right of the Corporation or its
security holders) arising out of or otherwise based upon the performance of any
of the Administrator's duties or obligations under this Agreement or otherwise
as administrator for the Corporation. Notwithstanding the preceding sentence of
this Paragraph 5 to the contrary, nothing contained herein shall protect or be
deemed to protect the Indemnified Parties against or entitle or be deemed to
entitle the Indemnified Parties to indemnification in respect of, any liability
to the Corporation or its security holders to which the Indemnified Parties
would otherwise be subject by reason of criminal conduct, willful misfeasance,
bad faith or negligence in the performance of the Administrator's duties or by
reason of the reckless disregard of the Administrator's duties and obligations
under this Agreement (to the extent applicable, as the same shall be determined
in accordance with the Investment Company Act and any interpretations or
guidance by the SEC or its staff thereunder).

         6. Activities of the Administrator. The services of the Administrator
to the Corporation are not to be deemed to be exclusive, and the Administrator
and each other person providing services as arranged by the Administrator is
free to render services to others. It is understood that directors, officers,
employees and stockholders of the Corporation are or may become interested in
the Administrator and its affiliates, as directors, officers, members,
managers, employees, partners, stockholders or otherwise, and that the
Administrator and directors, officers, members, managers, employees, partners
and stockholders of the Administrator and its affiliates are or may become
similarly interested in the Corporation as stockholders or otherwise.

         7. Duration and Termination of this Agreement.

                  (a) This Agreement shall become effective as of the date
         hereof, and shall remain in force with respect to the Corporation for
         two years thereafter, and thereafter continue from year to year, but
         only so long as such continuance is specifically approved at least
         annually by (i) the Board of Directors of the Corporation and (ii) a
         majority of those members of the Corporation's Board of Directors who
         are not parties to this Agreement or "interested persons" (as defined
         in the Investment Company Act) of any such party.

                  (b) This Agreement may be terminated at any time, without the
         payment of any penalty, by vote of the Corporation's Board of
         Directors, or by the Administrator, upon 60 days' written notice to
         the other party. This Agreement may not be assigned by a party without
         the consent of the other party.

         8. Amendments of this Agreement. This Agreement may not be amended or
modified except by an instrument in writing signed by all parties hereto.

         9. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Neither party may assign, delegate or otherwise transfer this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party. No assignment by either party permitted
hereunder shall relieve the applicable party of its obligations under this
Agreement. Any assignment by either party in accordance with the terms of this
Agreement shall be pursuant to a written assignment agreement in which the
assignee expressly assumes the assigning party's rights and obligations
hereunder.

         10. Governing Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York, including without
limitation Sections 5-1401 and 5-1402 of the New York General Obligations Law
and New York Civil Practice Laws and Rules 327(b), and the applicable
provisions of the Investment Company Act, if any. To the extent that the
applicable laws of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Investment Company Act, if any,
the latter shall control. The parties unconditionally and irrevocably consent
to the exclusive jurisdiction of the courts located in the State of New York
and waive any objection with respect thereto, for the purpose of any action,
suit or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.

         11. No Waiver. The failure of either party to enforce at any time for
any period the provisions of or any rights deriving from this Agreement shall
not be construed to be a waiver of such provisions or rights or the right of
such party thereafter to enforce such provisions, and no waiver shall be
binding unless executed in writing by all parties hereto.

         12. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.

         13. Headings. The descriptive headings contained in this Agreement are
for convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.

         14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed to be an original
instrument and all of which taken together shall constitute one and the same
agreement.

         15. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by overnight courier service (with signature required), by facsimile,
or by registered or certified mail (postage prepaid, return receipt requested)
to the respective parties at their respective principal executive office
addresses.

         16. Entire Agreement. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, between the parties
with respect to such subject matter.


                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


<PAGE>



         IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.


                                         BLACKROCK KELSO CAPITAL CORPORATION


                                         /s/ Frank Gordon
                                         -----------------------------------
                                         By:    Frank Gordon
                                         Title: Chief Financial Officer


                                         BLACKROCK FINANCIAL MANAGEMENT, INC.


                                         /s/ James Kong
                                         ----------------------------------
                                         By:    James Kong
                                         Title: Managing Director



                       [SIGNATURE PAGE TO ADMINISTRATION
                AGREEMENT BY AND BETWEEN BLACKROCK KELSO CAPITAL
             CORPORATION AND BLACKROCK FINANCIAL MANAGEMENT, INC.]